Paul Ryan's Healthcare Plan Challenges A Key Tenet Of Obamacare

The modern debate over health reform turns on a central dispute over where to vest the inevitable considerations over the cost of competing medical choices.

During the Bush Administration, there was a push toward “consumer-directed” healthcare. It envisioned patients taking on more of the considerations over the relative cost of their healthcare choices. Constructs such as health savings accounts gave people more control over how their healthcare dollars were spent.

Obamacare represented a wholesale a rejection of these efforts. To liberals, burdening patients with these obligations was viewed with abhorrence. Besides, they argued, medical decisions were too complex to be consigned with consumers. Instead, Obamacare makes a nod toward resting these same decisions with government regulators, through constructs like the Independent Payment Advisory Board. But primarily the scheme relies on providers to bear responsibility for weighing the cost medical care, primarily through different forms of capitation.

The law contains various inducements to rapidly push doctors into employed relationships, mostly as part of hospital-run health systems. This consolidation is an essential part of Obamacare. Providers have to practice as part of entities that are large enough to take on the actuarial risk for medical care. The law even envisions that provider-run health plans will replace traditional insurance carriers.

Hospitals are favored because they provide the most obvious and expedient edifice around which these large-enough delivery units can be quickly erected. This revulsion of the “consumer-directed” archetype was a key part of Obamacare’s political triumph.

But the struggle over this central tenet of healthcare reform continues. The healthcare plan released today by House Speaker Paul Ryan offers a modern refashioning of the consumer empowerment that has formed the foundation of conservative policymaking. This turns principally on an expansion of health savings accounts and other elements that reshape the healthcare benefit into a defined contribution of money that consumers can own and control, and that becomes more portable. The idea is that people can own their own coverage and take it with them, even as they move around and between different insurance pools and jobs.

The Ryan Plan embraces Obamacare’s central premise that everyone should have financial access to basic health insurance, and nobody should be subject to higher premiums or dropped coverage if they get sick. These insurance reforms were billed as the key rationale for Obamacare’s passage. But, of course, the Affordable Care Act’s regulatory controls went well beyond the scope needed to achieve these goals.

The Ryan plan maintains these insurance reforms. The primary vehicle is modeled after the 1996 Health Insurance Portability and Accountability Act (commonly known as HIPAA) that protects workers from pre-existing conditions when they move from one job to another. These same protections would apply for everyone as they moved between health plans and insurance pools. People who hit certain hardships would be given the opportunity to re-enter the pool without being penalized.

The Ryan Plan envisions universal access to health insurance. Nobody would be priced out of coverage. The plan provides everyone with an advanceable, refundable tax credit if they don’t already have access to coverage through their employer and aren’t insured through a government program like Medicare. This portable payment would be adjusted for peoples’ age, ensuring that older Americans receive more support and that the credit is priced to reflect the actuarial cost of insuring different individuals. The credit would grow over time to reflect rising costs.

These credits would be portable, and would be large enough to buy a typical pre-Obamacare health plan. Instead of being forced onto cookie-cutter plans sold through tightly regulated government exchanges, consumers would be able to spend these credits in different markets and on any qualified health plan. The lack of competition from different insurance schemes, and benefit designs, is a key reason why the Obamacare plans are so costly. Under the Ryan plan, if consumers choose coverage that’s cheaper than the value of the credit, the excess money is deposited into an HSA-like account that they could use toward out-of-pocket health expenses.

The Ryan plan also contains a comprehensive framework for addressing Medicare and Medicaid’s fiscal challenges. Like the proposal for replacing Obamacare, the Medicaid and Medicare plans challenge the same political dogma over who should own the decision to select between different medical options and weigh relative costs, how patients acquire benefits and whether these choices are governed by regulators or taken by individuals in a competitive market.

Progressives billed Obamacare as a way to ensure universal access to coverage and to guarantee that people couldn’t face discrimination because of their health status. But the Ryan Plan makes clear that these goals can be achieved without giving federal agencies dominion over the design of peoples’ benefits, and putting doctors and government agencies in charge of rationing decisions over medical care.

The central dispute over the direction of health reform is no longer whether we'll guarantee universal access to coverage. That one is settled. It’s now over who will be in charge of dictating the terms of those benefits, and whether people will get to weigh for themselves the tradeoffs that come with different clinical choices.

Scott Gottlieb, MD: I’m a physician and a Resident Fellow at the American Enterprise Institute in Washington. I previously worked at the Food and Drug Administration as the agency’s Deputy Commissioner and before that, as a senior official at the Centers for Medicare and Me...